ECB Open to Further Tightening Despite July Rate Pause

The European Central Bank's (ECB) accounts of its July 22-23 monetary policy meeting reveal that policymakers remain open to further tightening despite keeping interest rates unchanged.

Members stress that another rate hike will likely be necessary unless the inflation outlook improves significantly, while avoiding any commitment to a move at the September meeting.

The Governing Council considers that incoming economic data provided a strong case for pausing the tightening cycle in July, with headline inflation falling to 2.8% in June from 3.2% in May and core inflation easing to 2.4% from 2.6%.

Policymakers note that wage developments also provided additional arguments for keeping rates unchanged, as labour cost pressures are moderating and the softening of labour market conditions reduces the probability that the energy shock will generate significant second-round effects.